Concept of Utility and Public Service Use

1. REPUBLIC ACT No. 2677

AN ACT TO AMEND SECTIONS TWO, THREE,
FOUR, TEN, THIRTEEN, AND FOURTEEN OF
COMMONWEALTH ACT NUMBERED ONE
HUNDRED
FORTY-SIX,
AS
AMENDED,
OTHERWISE
KNOWN
AS
THE
PUBLIC
SERVICE ACT, AND FOR OTHER PURPOSES.
Section 1. Section two, three, four, ten, thirteen,
and fourteen of Commonwealth Act Numbered
One hundred forty-six, as amended, otherwise
known as the Public Service Act, are hereby
amended to read as follows:
"Sec. 2. There is created under the Department of
Justice a commission which shall be designated
and known as the Public Service Commission,
composed of one Public Service Commissioner
and five Associate Commissioners, and which
shall be vested with the powers and duties
hereafter
specified.
Whenever
the
word
'Commission' is used in this Act, it shall be held to
mean the Public Service Commission, and
whenever the word 'Commissioner' is used in this
Act it shall be held to mean the Public Service
Commissioner or anyone of the Associate
Commissioners.
"The Public Service Commissioner and the
Associate Public Service Commissioners shall be
natural born citizens and residents of the
Philippines, not under thirty years of age;
members of the Bar of the Philippines, with at
least five years of law practice or five years of
employment in the government service requiring
a lawyer's diploma; and shall be appointed by the
President of the Philippines, with the consent of
the Commission on Appointments of the Congress
of the Philippines: Provided, however, That the
present Commissioner and the personnel of the
Commission shall continue in office without the
necessity of reappointment.
"The Commissioners shall have the rank and
privilege of retirement of Judge of the Courts of
First Instance."
"Sec. 3. The Commissioner and Associate
Commissioners shall hold office until they reach
the age of seventy years, or until removed in

accordance with the procedure prescribed in

section one hundred and seventy-three of Act
Numbered Twenty-seven hundred and eleven,
known
as
the
Revised
Administrative
Code: Provided,however, That upon retirement,
any Commissioner or Associate Commissioner
shall be entitled to all retirement benefits and
privileges for Judges of the Courts of First
Instance or under the retirement law to which he
may be entitled on the date of his retirement. In
case of the absence, for any reason, of the Public
Service
Commissioner,
the
Associate
Commissioner with seniority of appointment shall
act as Commissioner. If on account of absence,
illness, or incapacity of any of the Commissioners,
or whenever by reason of temporary disability of
any Commissioner or of a vacancy occurring
therein, the requisite number of Commissioners
necessary to render a decision or issue an order
in any case is not present, or in the event of a tie
vote among the Commissioners, the Secretary of
Justice may designate such number of Judges of
the Courts of First Instance, or such number of
attorneys of the legal division of the Commission,
as may be necessary, to sit temporarily as
Commissioners in the Public Service Commission.
"The Public Service Commission shall sit
individually or as a body en banc or in two
divisions of three Commissioners each. The Public
Service Commissioner shall preside when the
Commission sits en banc and one division. In the
other division, the Associate Commissioner with
seniority of appointment in that division shall
preside. Five Commissioners shall constitute a
quorum for sessions en banc and two
Commissioners shall constitute a quorum for the
sessions of a division. In the absence of a
quorum, the session shall be adjourned until the
requisite number is present.
"All the powers herein vested upon the
Commission shall be considered vested upon any
of the Commissioners, acting either individually
or
jointly
as
hereinafter
provided.
The
Commissioners shall equitably divide among
themselves all pending cases and those that may
hereafter be submitted to the Commission, in
such manner and form as they may determine,
and shall proceed to hear and determine the case
assigned to each or to their respective divisions,
or to the Commission en banc as follows:
uncontested cases, except those pertaining to the

fixing of rates, shall be decided by one

Commissioner; contested cases and all cases
involving the fixing of rates shall be decided by
the Commission in division and the concurrence
of at least two Commissioners in the division shall
be necessary for the promulgation of a decision
or
non-interlocutory
order
in
these
cases: Provided,however, That any motion for
reconsideration of a decision or non-interlocutory
order of any Commissioner or division shall be
heard directly by the Commission en banc and
the concurrence of at least four Commissioners
shall be necessary for the promulgation of a final
decision or order resolving such motion for
reconsideration."
"Sec. 4. The Public Service Commissioner shall
receive an annual compensation of thirteen
thousand
pesos; each of the
Associate
Commissioners an annual compensation of
twelve thousand pesos. The Commissioners shall
be assisted by one chief attorney, one finance
and rate regulation officer, one chief utilities
regulation engineer, one transportation regulation
chief, one secretary, and two public utilities
advisers,
who
shall
receive
an
annual
compensation of seven thousand two hundred
pesos each; five assistant chiefs of division who
shall receive an annual compensation of six
thousand pesos each, and eleven attorneys who
shall receive an annual compensation of five
thousand four hundred pesos each."
"Sec. 10. The Commission shall have its office in
the City of Manila at such place as may be
designated, and may hold hearings on any
proceedings at such times and places, within the
Philippines, as it may provide by order in
writing: Provided, That during the months of April
and May of each year, at least three
Commissioners shall be on duty and the other
Commissioners shall be on vacation in such
manner that once every two years at least three
of them shall be on duty during April and
May: Provided, however, That in the interest of
public service, the Secretary of Justice may
require any or all of the Commissioners not on
duty to render services and perform their duties
during the vacation months."
"Sec. 13. (a) The Commission shall have
jurisdiction, supervision and control over all
public services and their franchises, equipment,

and other properties, and in the exercise of its

authority, it shall have the necessary powers and
the aid of public force: Provided, That public
services owned or operated by government
entities or government-owned or controlled
corporations
shall
be
regulated
by
the
Commission in the same way as privately-owned
public services, but certificates of public
convenience or certificates of public convenience
and necessity shall not be required of such
entities or corporations: And provided, further,
That it shall have no authority to require
steamboats, motorships and steamship lines,
whether privately-owned, or owned or operated
any government controlled corporation or
instrumentality to obtain certificate of public
convenience or to prescribe their definite routes
or lines of service.
"(b) The term 'public service' includes
every person that now or hereafter may
own, operate, manage, or control in the
Philippines, for hire or compensation, with
general or limited clientele, whether
permanent, occasional or accidental, and
done for general business purposes, any
common carrier, railroad, street railway,
traction railway, sub-way motor vehicle,
either for freight or passenger, or both
with or without fixed route and whatever
may be its classification, freight or carrier
service of any class, express service,
steamboat, or steamship line, pontines,
ferries, and water craft, engaged in the
transportation of passengers or freight or
both, shipyard, marine railway, marine
repair shop, wharf or dock, ice plant, icerefrigeration
plant,
canal,
irrigation
system, gas electric light, heat and power,
water supply and power, petroleum,
sewerage system, wire or wireless
communications system, wire or wireless
broadcasting stations and other similar
public services: Provided, however, That a
person engaged in agriculture, not
otherwise a public service, who owns a
motor vehicle and uses it personally
and/or enters into a special contract
whereby said motor vehicle is offered for
hire or compensation to a third party or
third engaged in agriculture, not itself or
themselves a public service, for operation
by the latter for a limited time and for a
specific purpose directly connected with

the cultivation of his or their farm, the

transportation, processing, and marketing
of agricultural products of such third party
or third parties shall not be considered as
operating a public service for the purposes
of this Act.
"(c) The word 'person' includes every
individual,
copartnership,
joint-stock
company
or
corporation,
whether
domestic or foreign, their lessees, trustees
or receivers, as well as any municipality,
province, city, government-owned or
controlled corporation, or agency of the
Government of the Philippines, and
whatever other persons or entities that
may own or possess or operate public
services."
"Sec. 14. The following are exempted from the
provisions of the preceding section:
"(a) Warehouses;
"(b) Vehicles drawn by animals and bancas
moved by oar or sail, and tugboats and
lighters;
"(c) Airships within the Philippines except
as regards the fixing of their maximum
rates on freight and passengers;
"(d) Radio companies except with respect
to the fixing of rates;
"(e) Public services owned or operated by
any instrumentality of the National
Government or by any government-owned
or controlled corporation, except with
respect to the fixing of rates."

2. RODOLFO B. ALBANO, petitioner, vs. HON.

RAINERIO O. REYES, PHILIPPINE PORTS
AUTHORITY,
INTERNATIONAL
CONTAINER
TERMINAL SERVICES, INC., E. RAZON, INC.,
ANSCOR CONTAINER CORPORATION, and
SEALAND SERVICES. LTD.,respondents.
G.R. No. 83551 July 11, 1989
FACTS:
On April 20, 1987, the PPA Board adopted its
Resolution No. 850 directing PPA management to

prepare the Invitation to Bid and all relevant

bidding documents and technical requirements
necessary for the public bidding of the
development, management and operation of the
MICT at the Port of Manila, and authorizing the
Board Chairman, Secretary Rainerio O. Reyes, to
oversee the preparation of the technical and the
documentation requirements for the MICT leasing
as well as to implement this project.
Accordingly, respondent Secretary Reyes, by
DOTC Special Order 87-346, created a seven (7)
man "Special MICT Bidding Committee" charged
with evaluating all bid proposals, recommending
to the Board the best bid, and preparing the
corresponding contract between the PPA and the
winning bidder or contractor. The Bidding
Committee
consisted
of
three
(3)
PPA
representatives,
two
(2)
Department
of
Transportation and Communications (DOTC)
representatives, one (1) Department of Trade and
Industry (DTI) representative and one (1) private
sector representative. The PPA management
prepared the terms of reference, bid documents
and draft contract which materials were approved
by the PPA Board.
The PPA published the Invitation to Bid several
times in a newspaper of general circulation which
publication included the reservation by the PPA of
"the right to reject any or all bids and to waive
any informality in the bids or to accept such bids
which may be considered most advantageous to
the government."
Seven
(7) consortia of
companies
actually
submitted bids, which bids were opened on July
17, 1987 at the PPA Head Office. After evaluation
of the several bids, the Bidding Committee
recommended the award of the contract to
develop, manage and operate the MICT to
respondent International Container Terminal
Services, Inc. (ICTSI) as having offered the best
Technical and Financial Proposal. Accordingly,
respondent
Secretary
declared
the
ICTSI consortium as the winning bidder.
Before the corresponding MICT contract could be
signed, two successive cases were filed against
the respondents which assailed the legality or
regularity of the MICT bidding. The first was
Special Civil Action 55489 for "Prohibition with
Preliminary Injunction" filed with the RTC of Pasig
by Basilio H. Alo, an alleged "concerned
taxpayer", and, the second was Civil Case 88-

43616 for "Prohibition with Prayer for Temporary

Restraining Order (TRO)" filed with the RTC of
Manila by C.F. Sharp Co., Inc., a member of the
nine (9) firm consortium "Manila Container
Terminals, Inc." which had actively participated in
the MICT Bidding.
Restraining Orders were issued in Civil Case 8843616 but these were subsequently lifted by this
Court in Resolutions dated March 17, 1988 (in
G.R. No. 82218 captioned "Hon. Rainerio O. Reyes
etc., et al. vs. Hon. Doroteo N. Caneba, etc., et
al.) and April 14, 1988 (in G.R. No. 81947
captioned "Hon. Rainerio O. Reyes etc., et al. vs.
Court of Appeals, et al.")
On May 18, 1988, the President of the Philippines
approved the proposed MICT Contract, with
directives that "the responsibility for planning,
detailed engineering, construction, expansion,
rehabilitation and capital dredging of the port, as
well as the determination of how the revenues of
the port system shall be allocated for future port
works, shall remain with the PPA; and the
contractor shall not collect taxes and duties
except that in the case of wharfage or tonnage
dues and harbor and berthing fees, payment to
the Government may be made through the
contractor who shall issue provisional receipts
and turn over the payments to the Government
which will issue the official receipts." (Annex "I").
The next day, the PPA and the ICTSI perfected the
MICT Contract (Annex "3") incorporating therein
by "clarificatory guidelines" the aforementioned
presidential directives. (Annex "4").
NATURE OF THE CASE:
This is a Petition for Prohibition with prayer for
Preliminary Injunction or Restraining Order
seeking to restrain the respondents Philippine
Ports Authority (PPA) and the Secretary of the
Department
of
Transportation
and
Communications Rainerio O. Reyes from awarding
to the International Container Terminal Services,
Inc. (ICTSI) the contract for the development,
management and operation of the Manila
International Container Terminal (MICT).
ISSUE:
WON the MICT, being a public utility needs a
second franchise to operate as such.
HELD:
NO .A review of the applicable provisions of law
indicates that a franchise specially granted by

Congress is not necessary for the operation of the

Manila International Container Port (MICP) by a
private entity, a contract entered into by the PPA
and
such
entity
constituting
substantial
compliance with the law.
Thus, while the PPA has been tasked, under E.O.
No. 30, with the management and operation of
the Manila International Port Complex and to
undertake the providing of cargo handling and
port related services thereat, the law provides
that such shall be "in accordance with P.D. 857
and other applicable laws and regulations." On
the other hand, P.D. No. 857 expressly empowers
the PPA to provide services within Port Districts
"whether on its own, by contract, or otherwise"
[See. 6(a) (v)]. Therefore, under the terms of E.O.
No. 30 and P.D. No. 857, the PPA may contract
with the International Container Terminal
Services, Inc. (ICTSI) for the management,
operation and development of the MICP.
3. THE UNITED STATES, plaintiff-appellee, vs.
TAN PIACO, VENTURA ESTUYA, PEDRO
HOMERES, MAXIMINO GALSA and EMILIO
LEOPANDO, defendants. TAN PIACO, appellant.
G.R. No. L-15122
March 10, 1920
FACTS:
The appellant rented two automobile trucks and
was using them upon the highways of the
Province of Leyte for the purpose of carrying
some passengers and freight; that he carried
passengers and freight under a special contract
in each case; that he had not held himself out to
carry all passengers and all freight for all persons
who might offer passengers and freight.
The Attorney-General, in a carefully prepared
brief, says: "The question is whether the
appellant, under the above facts, was a public
utility under the foregoing definitions," and was
therefore subject to the control and regulation of
the Public Utility Commission. "We have not found
anything in the evidence showing that the
appellant operated the trucks in question for
public use. These trucks, so far as indicated by
the evidence and as far as the appellant is
concerned, furnished
service
under special
agreements to carry particular persons and
property. . . . For all that we can deduce from the
evidence, these passengers, or the owners of the
freight, may have controlled the whole vehicles
'both as to content, direction, and time of use,'

which facts, under all the circumstances of the

case, would, in our opinion, take away the
defendant's business from the provisions of the
Public Utility Act."
In support of the conclusion of the AttorneyGeneral, he cites the case of Terminal Taxicab Co.
vs. Kutz (241 U. S.. 252). In that case the Terminal
Taxicab Co. furnished automobiles from its central
garage on special orders and did not hold itself
out to accommodate any and all persons. The
plaintiff reserve to itself the right to refuse
service. The Supreme Court of the United States,
speaking through Mr. Justice Holmes, said: "The
bargains made by the plaintiff are individual, and
however much they may tend towards uniformity
in price, probably have not the mechanical fixity
of charges that attend the use of taxicabs from
the stations to the hotels. The court is of the
opinion that that part of the business is not to be
regarded as a public utility. It is true that all
business, and for the matter of that, every life in
all its details, has a public aspect, some bearing
upon the welfare of the country in which it is
passed." The court held that by virtue of the fact
that said company did not hold itself out to serve
any and all persons, it was not a public utility and
was not subject to the jurisdiction of the public
utility commission.
NATURE OF THE CASE:
Said defendants were charged with a violation of
the Public Utility Law (Act No. 2307 as amended
by Acts Nos. 2362 and 2694), in that they were
operating a public utility without permission from
the Public Utility Commissioner.
Upon the complain presented each of said
defendants were arrested and brought to trial.
After hearing the evidence the Honorable
Cayetano Lukban, judge, found that the evidence
was insufficient to support the charges against
Ventura Estuya, Pedro Homeres, Maximino Galsa
and Emilio Leopando, and absolved them from all
liability under the complaint and discharged them
from all liability under the complaint and
discharged them from the custody of the law. The
lower court found the defendant Tan Piaco guilty
of the crime charged in the complaint and
sentence him to pay a fine of P100, and, in case
of insolvency, to suffer subsidiary imprisonment,
and to pay one-fifth part of the costs. From that
sentence Tan Piaco appealed to this court.
ISSUE:

WON the appellant was operating a public utility

hence subject to the jurisdiction of Public Utility
Commission
HELD:
NO. "Public use" means the same as "use by the
public." The essential feature of the public use is
that it is not confined to privilege individuals, but
is open to the indefinite public. It is this indefinite
or unrestricted quality that gives it its public
character. In determining whether a use is public,
we must look not only the character of the
business to be done, but also to the proposed
mode of doing it. If the use is merely optional
with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility
commission. There must be, in general, a right
which the law compels the power to give to the
general public. It is not enough that the general
prosperity of the public is promoted. Public use is
not synonymous with public interest. The true
criterion by which to judge of the character of the
use is whether the public may enjoy it by rightor
only by permission.

4.

REPUBLIC
OF
THE
PHILIPPINES,
REPRESENTED
BY
ENERGY
REGULATORY
BOARD, petitioner,
vs.MANILA
ELECTRIC
COMPANY, respondent.
[G.R. No. 141369. April 9, 2003]

FACTS:
MERALCO filed with the Energy Regulatory Board
(ERB) an application for revised rates, with an
average increase of P0.21 per kwh in its
distribution charge.
the
ERB
granted
a provisional
increase of P0.184 per kwh subject to the
condition that in the event the ERB determines
that MERALCO is entitled to a lesser increase in
rates, all excess amounts collected by MERALCO
shall be refunded to its customers or credited in
their favor. The Commission on Audit (COA)
conducted an examination of the books of
accounts and records of MERALCO and thereafter
recommended, among others, that: (1) income
taxes paid by MERALCO should not be included as
part of MERALCOs operating expenses and (2) the
net average investment method or the number of
months use method should be applied in

determining the proportionate value of the

properties used by MERALCO during the test year.
ERB adopted the recommendations of the
COA and authorized MERALCO to adopt a rate
adjustment
of P0.017
per
kilowatthour
(kwh) for its billing cycles beginning 1994. The
ERB further directed MERALCO to credit the
excess average amount of P0.167 per kwh
to its customers starting with MERALCOs billing
cycles beginning February 1994.
The said ruling of the ERB was affirmed by this
Court in its decision dated November 15, 2002.
In its Motion for Reconsideration, respondent
MERALCO contends that: (1) the deduction of
income tax from revenues allowed for rate
determination of public utilities is part of its
constitutional right to property; (2) it correctly
used the average investment method or the
simple average in computing the value of its
properties entitled to a return instead of the net
average investment method or the number of
months use method; and (3) the decision of the
ERB ordering the refund of P0.167 per kwh to its
customers should not be given retroactive effect.
The Republic of the Philippines through the ERB,
now Energy Regulatory Commission (ERC),
represented by the Office of the Solicitor General,
filed its Comment on March 7, 2003. Surprisingly,
in its Comment, the ERC proffered a divergent
view from the Office of the Solicitor General. The
ERC submits that income taxes are not operating
expenses but are reasonable costs that may be
recoverable from the consuming public. While the
ERC admits that there is still no categorical
determination on whether income tax should
indeed be deducted from revenues of a public
utility, it agrees with MERALCO that to disallow
public utilities from recovering its income tax
payments will effectively lower the return on rate
base enjoyed by a public utility to 8%. The ERC,
however, agrees with this Courts ruling that the
use of the net average investment method or the
number of months use method is not
unreasonable.
NATURE OF THE CASE:
For resolution is the Motion for Reconsideration
filed by respondent Manila Electric Company
(MERALCO) on December 5, 2002 from the
decision of this Court dated November 15, 2002
reducing MERALCOs rate adjustment in the

amount of P0.017 per kilowatthour (kwh) for its

billing cycles beginning 1994 and further
directing MERALCO to credit the excess average
amount of P0.167 per kwh to its customers
starting with MERALCOs billing cycles beginning
February 1994.
ISSUE:
WON the jurisprudence cited by MERALCO is
applicable in our jurisdiction
HELD:
MERALCO argues that deduction of all kinds of
taxes, including income tax, from the gross
revenues of a public utility is firmly entrenched in
American jurisprudence. It contends that the
Public Service Act (Commonwealth Act No. 146)
was patterned after Act 2306 of the Philippine
Commission, which, in turn, was borrowed from
American state public utility laws such as the
New Jersey Public Utility Act. Hence, it maintains
that American jurisprudence on the inclusion of
income taxes as a lawful charge to operating
expenses should be controlling. It cites the rule
on statutory construction that a statute adopted
from a foreign country will be presumed to be
adopted with the construction placed upon it by
the courts of that country before its adoption.
We are not persuaded. American decisions and
authorities are not per se controlling in this
jurisdiction. At best, they are persuasive for
no court holds a patent on correct
decisions. Our laws must be construed in
accordance with the intention of our own
lawmakers and such intent may be deduced from
the language of each law and the context of other
local
legislation
related
thereto.
More
importantly, they must be construed to serve
our own public interest which is the be-all
and the end-all of all our laws. And it need
not be stressed that our public interest is
distinct and different from others.
5. THE PEOPLE OF THE PHILIPPINES, plaintiffappellee, vs. WILLIAM H. QUASHA, defendantappellant.
G.R. No. L-6055
June 12, 1953
FACTS:
The essential facts are not in dispute. On
November
4,1946,
the
Pacific
Airways
Corporation registered its articles of incorporation
with the Securities and Exchanged Commission.
The article were prepared and the registration

was effected by the accused, who was in fact the

organizer of the corporation. The article stated
that the primary purpose of the corporation was
to carry on the business of a common carrier by
air, land or water; that its capital stock was
P1,000,000, represented by 9,000 preferred and
100,000 common shares, each preferred share
being of the par value of p100 and entitled to 1/3
vote and each common share, of the par value of
P1 and entitled to one vote; that the amount
capital stock actually subscribed was P200,000,
and the names of the subscribers were Arsenio
Baylon, Eruin E. Shannahan, Albert W. Onstott,
James O'Bannon, Denzel J. Cavin, and William H.
Quasha, the first being a Filipino and the other
five all Americans; that Baylon's subscription was
for 1,145 preferred shares, of the total value of
P114,500, and for 6,500 common shares, of the
total par value of P6,500, while the aggregate
subscriptions of the American subscribers were
for 200 preferred shares, of the total par value of
P20,000, and 59,000 common shares, of the total
par value of P59,000; and that Baylon and the
American subscribers had already paid 25 per
cent of their respective subscriptions. Ostensibly
the owner of, or subscriber to, 60.005 per cent of
the subscribed capital stock of the corporation,
Baylon nevertheless did not have the controlling
vote because of the difference in voting power
between the preferred shares and the common
shares. Still, with the capital structure as it was,
the article of incorporation were accepted for
registration and a certificate of incorporation was
issued by the Securities and Exchange
Commission.
NATURE OF THE CASE:
William H. Quasha, a member of the Philippine
bar, was charged in the Court of First Instance of
Manila with the crime of falsification of a public
and commercial document in that, having been
entrusted with the preparation and registration of
the article of incorporation of the Pacific Airways
Corporation, a domestic corporation organized for
the purpose of engaging in business as a
common carrier, he caused it to appear in said
article of incorporation that one Arsenio Baylon, a
Filipino citizen, had subscribed to and was the
owner of 60.005 per cent of the subscribed
capital stock of the corporation when in reality, as
the accused well knew, such was not the case,
the truth being that the owner of the portion of
the capital stock subscribed to by Baylon and the
money paid thereon were American citizen whose

name did not appear in the article of

incorporation, and that the purpose for making
this false statement was to circumvent the
constitutional mandate that no corporation shall
be authorize to operate as a public utility in the
Philippines unless 60 per cent of its capital stock
is owned by Filipinos.
Found guilty after trial and sentenced to a term of
imprisonment and a fine, the accused has
appealed to this Court.
ISSUE:
WON 60-40 requirement was needed to organize
corporation in question.
HELD:
NO. It is urged, however, that the formation of the
corporation with 60 per cent of its subscribed
capital stock appearing in the name of Baylon
was an indispensable preparatory step to the
subversion of the constitutional prohibition and
the laws implementing the policy expressed
therein. This view is not correct. For a corporation
to be entitled to operate a public utility it is not
necessary that it be organized with 60 per cent of
its capital owned by Filipinos from the start. A
corporation formed with capital that is entirely
alien may subsequently change the nationality of
its capital through transfer of shares to Filipino
citizens. conversely, a corporation originally
formed with Filipino capital may subsequently
change the national status of said capital through
transfer of shares to foreigners. What need is
there then for a corporation that intends to
operate a public utility to have, at the time of its
formation, 60 per cent of its capital owned by
Filipinos alone? That condition may anytime be
attained thru the necessary transfer of stocks.
The moment for determining whether a
corporation is entitled to operate as a public
utility is when it applies for a franchise,
certificate, or any other form of authorization for
that purpose. And that can be done after the
corporation has already come into being and not
while it is still being formed. And at that moment,
the corporation must show that it has complied
not only with the requirement of the Constitution
as to the nationality of its capital, but also with
the requirements of the Civil Aviation Law if it is a
common carrier by air, the Revised Administrative
Code if it is a common carrier by water, and the
Public Service Law if it is a common carrier by
land or other kind of public service.

6. PANGASINAN TRANSPORTATION CO.,

INC., petitioner, vs. THE PUBLIC SERVICE
COMMISSION, respondent.
G.R. No. 47065
June 26, 1940
FACTS:
The petitioner has been engaged for the past
twenty years in the business of transporting
passengers in the Province of Pangasinan and
Tarlac and, to a certain extent, in the Province of
Nueva Ecija and Zambales, by means of motor
vehicles commonly known as TPU buses, in
accordance with the terms and conditions of the
certificates of public convenience issued in its
favor by the former Public Utility Commission in
cases Nos. 24948, 30973, 36830, 32014 and
53090. On August 26, 1939, the petitioner filed
with the Public Service Commission an application
for authorization to operate ten additional new
Brockway trucks (case No. 56641), on the ground
that they were needed to comply with the terms
and conditions of its existing certificates and as a
result of the application of the Eight Hour Labor
Law.
Not being agreeable to the two new conditions
thus incorporated in its existing certificates, the
petitioner filed on October 9, 1939 a motion for
reconsideration which was denied by the Public
Service Commission on November 14, 1939.
Whereupon, on November 20, 1939, the present
petition for a writ of certiorari was instituted in
this court praying that an order be issued
directing the secretary of the Public Service
Commission to certify forthwith to this court the
records of all proceedings in case No. 56641; that
this court, after hearing, render a decision
declaring section 1 of Commonwealth Act No. 454
unconstitutional and void; that, if this court
should be of the opinion that section 1 of
Commonwealth Act No. 454 is constitutional, a
decision be rendered declaring that the provisions
thereof are not applicable to valid and subsisting
certificates issued prior to June 8, 1939.
HELD:
Under the first paragraph of the aforequoted
section 15 of Act No. 146, as amended, no public
service can operate without a certificate of public
convenience or certificate of convenience and
public necessity to the effect that the operation

of said service and the authorization to do

business will "public interests in a proper and
suitable manner." Under the second paragraph,
one of the conditions which the Public Service
Commission may prescribed the issuance of the
certificate provided for in the first paragraph is
that "the service can be acquired by the
Commonwealth of the Philippines or by any
instrumental thereof upon payment of the cost
price of its useful equipment, less reasonable
depreciation," a condition which is virtually a
restatement of the principle already embodied in
the Constitution, section 6 of Article XII, which
provides that "the State may, in the interest of
national welfare and defense, establish and
operate industries and means of transportation
and communication, and, upon payment of just
compensation, transfer to public ownership
utilities and other private enterprises to be
operated by the Government. "Another condition
which the Commission may prescribed, and which
is assailed by the petitioner, is that the certificate
"shall be valid only for a definite period of time."
As there is a relation between the first and
second paragraphs of said section 15, the two
provisions must be read and interpreted together.
That is to say, in issuing a certificate, the
Commission must necessarily be satisfied that
the operation of the service under said
certificate during
a
definite
period
fixed
therein "will promote the public interests in a
proper and suitable manner." Under section 16
(a) of Commonwealth Act. No. 146 which is a
complement of section 15, the Commission is
empowered to issue certificates of public
convenience whenever it "finds that the operation
of the public service proposed and the
authorization to do business will promote the
public interests in a proper and suitable manner."
Inasmuch as the period to be fixed by the
Commission under section 15 is inseparable from
the certificate itself, said period cannot be
disregarded by the Commission in determining
the question whether the issuance of the
certificate will promote the public interests in a
proper and suitable manner. Conversely, in
determining "a definite period of time," the
Commission will be guided by "public interests,"
the only limitation to its power being that said
period shall not exceed fifty years (sec. 16 (a),
Commonwealth Act No. 146; Constitution, Art.
XIII, sec. 8.) We have already ruled that "public
interest"
furnishes
a
sufficient
standard.
(People vs. Fernandez and Trinidad, G. R. No.

45655,
promulgated
June
15,
1938;
People vs. Rosenthal and Osmea, G. R. Nos.
46076 and 46077, promulgated June 12, 1939,
citing
New
York
Central
Securities
Corporation vs. U.S.A., 287 U.S. 12, 24, 25, 77
Law. ed. 138, 145, 146; Schenchter Poultry
Corporation vs. I.S., 295, 540, 79 Law. ed. 1570,
1585; Ferrazzini vs. Gsell, 34 Phil., 697, 711-712.)
The petitioner is mistaken in the suggestion that,
simply because its existing certificates had been
granted before June 8, 1939, the date when
Commonwealth Act No. 454, amendatory of
section 15 of Commonwealth Act No. 146, was
approved, it must be deemed to have the right of
holding them in perpetuity. Section 74 of the
Philippine Bill provided that "no franchise,
privilege, or concession shall be granted to any
corporation except under the conditions that it
shall be subject to amendment, alteration, or
repeal by the Congress of the United States." The
Jones Law, incorporating a similar mandate,
provided, in section 28, that "no franchise or right
shall be granted to any individual, firm, or
corporation except under the conditions that it
shall be subject to amendment, alteration, or
repeal by the Congress of the United States."
Lastly, the Constitution of the Philippines
provided, in section 8 of Article XIII, that "no
franchise or right shall be granted to any
individual, firm, or corporation, except under the
condition that it shall be subject to amendment,
alteration, or repeal by the National Assembly
when the public interest so requires." The
National Assembly, by virtue of the Constitution,
logically succeeded to the Congress of the United
States in the power to amend, alter or repeal any
franchise or right granted prior to or after the
approval of the Constitution; and when
Commonwealth Acts Nos. 146 and 454 were
enacted, the National Assembly, to the extent
therein provided, has declared its will and
purpose to amend or alter existing certificates of
public convenience.

7. Republic v. EXTELCOM
G.R. No. 147096
January 15, 2002
FACTS:
On
December
29,
1992,
International
Communications
Corporation
(now
Bayan
Telecommunications, Inc. or Bayantel) filed an
application with the National Telecommunications

Commission (NTC) for a Certificate of Public

Convenience or Necessity (CPCN) to install,
operate and maintain a digital Cellular Mobile
Telephone System/Service (CMTS) with prayer for
a Provisional Authority (PA). Prior to the issuance
of any notice of hearing by the NTC with respect
to Bayantel's original application, Bayantel filed
an urgent ex-parte motion to admit an amended
application.The notice of hearing issued by the
NTC with respect to this amended application was
published in the Manila Chronicle. Copies of the
application as well as the notice of hearing were
mailed to all affected parties. Subsequently,
hearings were conducted on the amended
application. But before Bayantel could complete
the presentation of its evidence, the NTC issued
an Order granting Provisional Authorities in favor
of ISLACOM and GMCR, Inc., which resulted in the
closing out of all available frequencies for the
service being applied for by Bayantel.
Respondent Express Telecommunication Co., Inc.
(Extelcom) filed an Opposition praying for the
dismissal of Bayantel's application. On May 3,
2000, the NTC issued an Order granting in favor
of Bayantel a provisional authority to operate
CMTS service. Extelcom filed with the Court of
Appeals a petition for certiorari and prohibition,
seeking the annulment of the Order reviving the
application of Bayantel, the Order granting
Bayantel a provisional authority to construct,
install, operate and maintain a nationwide CMTS.
The CA granted such petition and set aside the PA
granted to Bayantel.
ISSUE:
Whether the CA erred in granting the petition of
Extelcom.
HELD:
YES. Extelcom violated the rule on exhaustion of
administrative remedies when it went directly to
the Court of Appeals on a petition for certiorari
and prohibition from the Order of the NTC dated
May 3, 2000, without first filing a motion for
reconsideration. It is well-settled that the filing of
a motion for reconsideration is a prerequisite to
the filing of a special civil action for certiorari.
The general rule is that, in order to give the lower
court the opportunity to correct itself, a motion
for reconsideration is a prerequisite to certiorari.
It also basic that petitioner must exhaust all other
available remedies before resorting to certiorari.
This rule, however, is subject to certain
exceptions such as any of the following: (1) the
issues raised are purely legal in nature, (2) public
interest is involved, (3) extreme urgency is
obvious or (4) special circumstances warrant
immediate or more direct action.

This case does not fall under any of the

recognized exceptions to this rule. Although the
Order of the NTC dated May 3, 2000 granting
provisional
authority
to
Bayantel
was
immediately executory, it did not preclude the
filing of a motion for reconsideration. Under the
NTC Rules, a party adversely affected by a
decision, order, ruling or resolution may within
fifteen (15) days file a motion for reconsideration.
That the Order of the NTC became immediately
executory does not mean that the remedy of
filing a motion for reconsideration is foreclosed to
the petitioner.
Furthermore, Extelcom does not enjoy the grant
of any vested interest on the right to render a
public service. The Constitution is quite emphatic
that the operation of a public utility shall not be
exclusive. Thus:
No franchise, certificate, or any other form of
authorization for the operation of a public utility
shall be granted to citizens of the Philippines or to
corporations organized under the laws of the
Philippines at least sixty per centum of whose
capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive
in character or for a longer period than fifty
years. Neither shall any such franchise or right be
granted except under the condition that it shall
be subject to amendment, alteraion, or repeal by
the Congress when the common good so
requires. Even in the provisional authority
granted to Extelcom, it is expressly stated that
such authority is not exclusive. Thus, the Court of
Appeals erred when it gave due course to
Extelcom's petition and ruled that it constitutes
an exception to the rule on exhaustion of
administrative remedies.
Also, the Court of Appeals erred in annulling the
Order of the NTC dated May 3, 2000, granting
Bayantel a provisional authority to install, operate
and maintain CMTS. The general rule is that
purely administrative and discretionary functions
may not be interfered with by the courts. In the
case at bar, we find no reason to disturb the
factual findings of the NTC which formed the
basis for awarding the provisional authority to
Bayantel. As found by the NTC, Bayantel has
been granted several provisional and permanent
authorities
before
to
operate
various
telecommunications services.51 Indeed, it was
established that Bayantel was the first company
to comply with its obligation to install local
exchange lines pursuant to E.O. 109 and R.A.
7925. In recognition of the same, the provisional
authority awarded in favor of Bayantel to operate
Local Exchange Services in Quezon City, Malabon,
Valenzuela and the entire Bicol region was made
permanent and a CPCN for the said service was

granted in its favor. Prima facie evidence was

likewise found showing Bayantel's legal, financial
and technical capacity to undertake the proposed
cellular mobile telephone service.
8. Pilipino Telephone v NTC
G.R. No. 138295
August 28, 2003
FACTS:
The National Telecommunications Commission
(NTC) issued Pilipino Telephone Corporation
(PILTEL) a Provisional Authority (PA) to install,
operate and maintain telephone exchanges and
public calling offices. While PILTELs PA was still
valid
and
subsisting,
the
International
Communications Corporation (ICC) applied with
the NTC for a PA to construct, operate and
maintain local exchange services in some of the
areas covered by PILTELs PA. PILTEL filed an
Opposition to ICCs PA application. NTC issued an
Order grating ICC a PA to establish local exchange
services in areas that included those covered by
PILTELs PA. PILTEL filed a petition for certiorari
with prayer for the issuance of a temporary
restraining order or writ of preliminary injunction
with the CA to nullify the NTC Order. The CA
denied the petition on the grounds that: (1)
PILTEL has not shown that they have no plain,
speedy, and adequate remedy; (2) PILTEL failed
to file a MR of the NTC Order; (3) PILTEL failed to
show grave abuse of discretion on the part of the
NTC. Hence, this petition.
ISSUE:
Whether NTC
discretion.

committed

grave

abuse

of

HELD:
NO. PILTEL contends that the NTC violated
Section 23 of NTC Memorandum Circular No. 119-93, otherwise known as the "Implementing
Guidelines on the Provisions of EO 109," which
states:
Section 23. No other company or entity shall be
authorized to provide local exchange service in
areas where the LECs comply with the relevant
provisions of NTC MC No. 10-17-90 and NTC MC
No. 10-16-90 and that the local exchange service
area is not underserved.
Section 23 of EO 109 does not categorically state
that the issuance of a PA is exclusive to any
telecommunications company. Neither Congress
nor the NTC can grant an exclusive "franchise,
certificate, of any other form of authorization" to
operate a public utility. In Republic v. Express
Telecommunications Co., the Court held that
"the Constitution is quite emphatic that the

operation of a public utility shall

exclusive." Section 11, Article XII
Constitution provides:

not be
of the

Sec. 11. No franchise, certificate, or any other

form of authorization for the operation of a public
utility shall be granted to citizens of the
Philippines or to corporations or associations
organized under the laws of the Philippines at
least sixty per centum of whose capital is owned
by such citizens, nor shall such franchise,
certificate or authorization be exclusive in
character or for a longer period than fifty years.
Neither shall any such franchise or right be
granted except under the condition that it shall
be subject to amendment, alteration, or repeal by
the Congress when the common good so
requires. xxx
The Court ruled that the "Constitution mandates
that a franchise cannot be exclusive in nature."
Even PILTELs franchise, Republic Act No. 6030
("RA 6030"), expressly declares that PILTELs right
to provide telecommunications services is not
exclusive.
Furthermore, "free competition in the industry
may also provide the answer to a much-desired
improvement in the quality and delivery of this
type of public utility, to improved technology, fast
and handy mobil[e] service, and reduced user
dissatisfaction."

9. NAPOCOR v. CA
G.R. No. 112702
September 26, 1997
FACTS:
The Cagayan Electric and power Light Company
(CEPALCO) was enfranchised by Republic Act No.
3247 "to construct, maintain and operate an
electric light, heat and power system for the
purpose of generating and/or distributing electric
light, heat and/or power for sale within the City of
Cagayan de Oro and its suburbs" for fifty (50)
years. Republic Act No. 3570, approved on June
21, 1963, expanded the area of coverage of the
franchise to include the municipalities of Tagoloan
and Opol, both in the Province of Misamis
Oriental. Presidential Decree No. 243, issued on
July 12, 1973, created a "body corporate and
politic" to be known as the Philippine Veterans
Investment Development Corporation (PHIVIDEC)
vested with authority to engage in "commercial,
industrial,
mining,
agricultural
and
other
enterprises" among other powers and "to allow
the full and continued employment of the

productive capabilities of and investment of the

veterans and retirees of the Armed Forces of the
Philippines." On August 13, 1974, Presidential
Decree No. 538 was promulgated to create the
PHIVIDEC Industrial Authority (PIA), a subsidiary
of PHIVIDEC, to carry out the government policy
"to encourage, promote and sustain the economic
and social growth of the country and that the
establishment of professionalized management of
well-planned industrial areas shall further this
objective." Under Sec. 3 of P.D. No. 538, the first
area for development shall be located in the
municipalities of Tagoloan and Villanueva. This
area forms part of the PHIVIDEC Industrial Estate
Misamis Oriental (PIE-MO).
According to PIA, the CEPALCO proved no match
to the power demands of the industries in PIE-MO
such that most of these companies operating
therein closed shop. Impelled by a "desire to
provide cheap power costs to power-intensive
industries operating within the Estate," PIA
applied with the National Power Corporation
(NPC) for direct power connection which the latter
in due course approved. One of the companies
which entered into an agreement with the NPC for
a direct sale and supply of power was the
Ferrochrome Phils., Inc. (FPI).Contending that the
said agreement violated its right as the
authorized operator of an electric light and power
system in the area and the national electrification
policy, CEPALCO filed a Civil Case, a petition for
prohibition, mandamus and injunction before the
Regional Trial Court of Quezon City against the
NPC. Notwithstanding NPC's claim that it was
authorized by its Charter to sell electric power "in
bulk" to industrial enterprises, the lower court
rendered a decision, restraining the NPC from
supplying power directly to FPI upon the ground
that such direct sale, supply and delivery of
electric power by the NPC to FPI was violative
of the rights of CEPALCO under its legislative
franchise. Hence, the lower court ordered the NPC
to "permanently desist" from effecting direct
supply of power to the FPI and "from entering into
and/or
implementing
any
agreement
or
arrangement for such direct power connection,
unless coursed through the power line" of
CEPALCO. The SC affirmed, and FPI persisted with
its application. FPI also contended that CEPALCO
charged higher than the allowed rates mandated
by the NPC. NPC ruled for FPI to the detriment of
CEPALCO.
NPC
began
to provide
direct
power connection to FPI. Petitioner PIA asserts

that it may receive power directly from the NPC

because it is a public utility. It avers that P.D. No.
538, as amended, empowers PIA "as and to be a
public utility to operate and serve the power
needs within PIE-MO.

by Republic Act No. 2036 (1957). The petitioner

established a radio telegraph service in Sorsogon,
Sorsogon (1968), in San Jose, Mindoro (1971),
and Catarman, Samar (1983). Kayumanggi Radio,
on the other hand, was given the rights by the
NTC to operate radio networks in the same areas.

ISSUE: Whether the NPC may supply power

directly to PIA in the PIE-MO area where CEPALCO
has a franchise.

RCPI filed a complaint in the NTC and sought to

prohibit Kayumanggi Radio to operate in the
same areas, alleging that the petitioner was
operating in Catarman, Samar and in San Jose,
Mindoro without a certificate of public covenience
and necessity. The petitioner, on the other hand,
counter-alleged that its telephone services in the
places subject of the complaint are covered by
the legislative franchise recognized by both the
public respondent and its predecessor, the Public
Service Commission. The NTC ruled against the
RTCs favor and commanded RCPI to desist in the
operation of radio telegraphs in the three areas.

HELD: A "public utility" is a business or service

engaged in regularly supplying the public with
some
commodity
or
service
of
public
consequence such as electricity, gas, water,
transportation, telephone or telegraph service.
The term implies public use and service.
Petitioner PIA is a subsidiary of the PHIVIDEC with
"governmental and proprietary functions Clearly
then, the PIA is authorized to render indirect
service to the public by its administration of the
PHIVIDEC industrial areas like the PIE-MO and
may, therefore, be considered a public utility. As
it is expressly authorized by law to perform the
functions of a public utility, a certificate of public
convenience, as suggested by the Court of
Appeals, is not necessary for it to avail of a direct
power connection from the NPC. However, such
authority to be a public utility may not be
exercised in such a manner as to prejudice the
rights of existing franchisees. The determination
of which of two public utilities has the right to
supply electric power to an area which is within
the coverage of both is certainly not a rate-fixing
function which should remain with the ERB. It
deals with the regulation of the distribution of
energy resources which, under Executive Order
No. 172, was expressly a function of ERB.
However, with the enactment of Republic Act No.
7638, the Department of Energy took over such
function. Hence, it is this Department which shall
then determine whether CEPALCO or PIA should
supply power to PIE-MO. Clearly, petitioner NPC's
assertion that its "authority to entertain and hear
direct connection applications is a necessary
incident of its express authority to sell electric
power in bulk" is now baseless.
10. Radio Communications v. NTC
G.R. No. L-68729
May 29, 1987
Facts:
RCPI operated a radio communications system
since 1957 under legislative franchise granted

RTC filed MR in 1984 but was denied. In the SC,

Petitioner alleged that the Public Service Law had
sections that was still in effect even if the Public
Service Commission was abolished and the NTC
was established.
The provisions of the Public Service Law pertinent
to the petitioner's allegation are as follows:
Section 13. (a) the Commission shall have
jurisdiction, supervision, and control over all
public services and their franchises, equipment
and other properties, and in the exercise of its
authority, it shall have the necessary powers and
the aid of public force: ...
Section 14. The following are exempted from the
provisions of the preceding section:
(d) Radio companies except with respect to the
fixing of rates;
Section 15. With the exception of those
enumerated in the preceding section, no public
service shall operate in the Philippines without
possessing a valid and subsisting certificate from
the Public Service Commission, known as
"certificate of public convenience," or "certificate
of convenience and public necessity," as the case
may be, to the effect that the operation of said
service and the authorization to do business will
promote the public interests in a proper and
suitable manner. ...
Issue: Whether petitioner RCPI, a grantee of a
legislative franchise to operate a radio company,
is required to secure a certificate of public
convenience and necessity before it can validly
operate its radio stations including radio
telephone services in the aforementioned areas.

Held: Yes. Pursuant to Presidential Decree No. 1

dated September 23,1972, reorganizing the
executive branch of the National Government, the
Public Service Commission was abolished and its
functions were transferred to three specialized
regulatory boards. The functions so transferred
were still subject to the limitations provided in
sections 14 and 15 of the Public Service Law, as
amended. With the enactment of Executive Order
No. 546 on July 23, 1979 implementing P.D. No.1,
the
Board
of
Communications
and
the
Telecommunications
Control
Bureau
were
abolished and their functions were transferred to
the National Telecommunications Commission the
exemption enjoyed by radio companies from the
jurisdiction of the Public Service Commission and
the Board of Communications no longer exists
because of the changes effected by the
Reorganization Law and implementing executive
orders. The petitioner's claim that its franchise
cannot be affected by Executive Order No. 546 on
the ground that it has long been in operation
since 1957 cannot be sustained.
A franchise started out as a "royal privilege or (a)
branch of the King's prerogative, subsisting in the
hands of a subject." This definition was given by
Finch, adopted by Blackstone, and accepted by
every authority since. Today, a franchise, being
merely a privilege emanating from the sovereign
power of the state and owing its existence to a
grant, is subject to regulation by the state itself
by virtue of its police power through its
administrative agencies. The approval of the then
Secretary of Public Works and Communications
was a precondition before the petitioner could put
up radio stations in areas where it desires to
operate. It has been repeated time and again that
where the statutory norm speaks unequivocally,
there is nothing for the courts to do except to
apply it. The law, leaving no doubt as to the
scope of its operation, must be obeyed.
The records of the case do not show any grant of
authority from the then Secretary of Public Works
and Communications before the petitioner
installed the questioned radio telephone services
in San Jose, Mindoro in 1971. The same is true as
regards the radio telephone services opened in
Sorsogon, Sorsogon and Catarman, Samar in
1983. No certificate of public convenience and
necessity appears to have been secured by the
petitioner from the public respondent when such
certificate,was required by the applicable public
utility regulations It was well within the powers of
the public respondent to authorize the installation
by the private respondent network of radio
communications systems in Catarman, Samar
and San Jose, Mindoro. Under the circumstances
of this case, the mere fact that the petitioner
possesses a franchise to put up and operate a

radio communications system in certain areas is

not an insuperable obstacle to the public
respondent's issuing the proper certificate to an
applicant desiring to extend the same services to
those areas. The Constitution mandates that a
franchise cannot be exclusive in nature nor can a
franchise be granted except that it must be
subject to amendment, alteration, or even repeal
by the legislature when the common good so
requires. (Art. XII, sec. 11 of the 1986
Constitution). There is an express provision in the
petitioner's franchise which provides compliance
with the above mandate R.A. 2036, sec. 15).
Concept of Franchise and Certificate of
Public Convenience
1. National Development Company v. CA
August 19, 1998
G.R. No. L-49407
Facts: In accordance with a memorandum
agreement entered into between defendants NDC
and MCP, defendant NDC as the first preferred
mortgagee of three ocean going vessels including
one with the name 'Dona Nati' appointed
defendant MCP as its agent to manage and
operate said vessel for and in its behalf and
account. Several companies loaded their cargoes
with the Dona Nati. However, while en route to
Manila, the vessel figured in a collision with a
Japanese vessel. As a result thereof, some of the
cargoes were lost, damaged and destroyed. Thus,
respondent Development Insurance and Surety
Corporation, had paid as insurer the total amount
of P364,915.86 to the consignees or their
successors-in-interest, for the said lost or
damaged cargoes. Later on, respondent filed a
complaint to recover said amount from the
defendants-NDC and MCP as owner and ship
agent respectively, of the said 'DofiaNati' vessel.
The lower court ruled in their favor, applying the
Article 287 of the Code of Commerce.
On appeal, NDC argued that the Carriage of
Goods by Sea Act should apply to the case at bar
and not the Civil Code or the Code of Commerce.
Under Section 4 (2) of said Act, the carrier is not
responsible for the loss or damage resulting from
the "act, neglect or default of the master,
mariner, pilot or the servants of the carrier in the
navigation or in the management of the ship."
Thus, NDC insists that based on the findings of
the trial court which were adopted by the Court of
Appeals, both pilots of the colliding vessels were
at fault and negligent, NDC would have been

relieved of liability under the Carriage of Goods

by Sea Act.
Issue: Whether or not the contention of the
petitioner should be upheld.
Held: No. Under Article 1733 of the Civil Code,
common carriers from the nature of their
business and for reasons of public policy are
bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the
passengers transported by them according to all
circumstances of each case. Accordingly, under
Article 1735 of the same Code, in all other than
those mentioned is Article 1734 thereof, the
common carrier shall be presumed to have been
at fault or to have acted negligently, unless it
proves that it has observed the extraordinary
diligence required by law. It appears, however,
that collision falls among matters not specifically
regulated by the Civil Code, so that no reversible
error can be found in respondent courses
application to the case at bar of Articles 826 to
839, Book Three of the Code of Commerce, which
deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of
Commerce provides that where collision is
imputable to the personnel of a vessel, the owner
of the vessel at fault, shall indemnify the losses
and damages incurred after an expert appraisal.
But more in point to the instant case is Article
827 of the same Code, which provides that if the
collision is imputable to both vessels, each one
shall suffer its own damages and both shall be
solidarily responsible for the losses and damages
suffered by their cargoes.
Significantly, under the provisions of the Code of
Commerce, particularly Articles 826 to 839, the
shipowner or carrier, is not exempt from liability
for damages arising from collision due to the fault
or negligence of the captain. Primary liability is
imposed on the shipowner or carrier in
recognition of the universally accepted doctrine
that the shipmaster or captain is merely the
representative of the owner who has the actual or
constructive control over the conduct of the
voyage (Y'eung Sheng Exchange and Trading Co.
v. Urrutia& Co., 12 Phil. 751 [1909]).
2. Tatad v. Sec. Garcia
April 16, 1995

Facts: EDSA LRT Consortium, a foreign

corporation, was awarded with the construction of
Light RailTransit III (LRT III) as the only bidder who
has qualified with the requirements provided by
the PBAC.The said foreign corporation will
construct the LRT III in a Built-Lease-Transfer
agreement that suchpublic utility will be leased
by the government through the Department of
Transportation andCommunication (DOTC) and
then it would be subsequently sold by the
corporation to the government. An objection was
raised by the petitioner, alleging that the
agreement was unconstitutional since it grants
the consortium, which is a foreign corporation,
the ownership of the EDSA LRT which is a public
utility.
Issue: Whether or not the awarding of the bid to
EDSA LRT Consortium is against the Constitution
Held: No. The Court ruled that what the LRT
Consortium owns are the rail tracks, rolling stocks
like the coaches, rail stations, terminals and the
power plant, not a public utility. While a franchise
is needed to operate these facilities to serve the
public, they do not by themselves constitute a
public utility. What constitutes a public utility is
not their ownership but their use to serve the
public. There is a distinction between ownership
and operation. The consortium will not run the
light rail vehicles and collect fees from the riding
public. It will have no dealings with the public and
the public will have no right to demand any
services from it. A franchise is only required for
the operation and not the ownership.
3. Radio Communications of the Phils v. NTC
150 SCRA 450
Facts: Kayumanggi Radio Network Inc. filed a
complaint with NTC alleging that petitioner RCPI
was operating in Catarman without certificate of
public convenience and necessity. RCPI counteralleged that its telephone services in the areas
are covered by the legislative franchise
recognized by NTC and its predecessor Public
Service Commission.
After conducting hearing, NTC ordered RCPI to
immediately cease from operating in these areas,
stating that under EO 546, a certificate of public
convenience and necessity is mandatory for the
operation of communication utilities and services
including radio communications.

The petitioner contends that its franchise cannot

be affected by Executive Order No. 546 on the
ground that it has long been in operation since
1957.
Issue: Whether or not petitioner RCPI, a grantee
of a legislative franchise to operate a radio
company, is required to secure a certificate of
public convenience and necessity before it can
validly operate its radio stations including radio
telephone services
Held: Yes. A franchise, being merely a privilege
emanating from the sovereign power of the state
and owing its existence to a grant, is subject to
regulation by the state itself by virtue of its police
power through its administrative agencies. We
ruled in Pangasinan transportation Co., Inc. v.
Public Service Commission (70 Phil. 221) that:
... statutes enacted for the regulation of
public utilities, being a proper exercise by
the State of its police power, are applicable
not only to those public utilities coming into

existence after its passage, but likewise to

those
already
established
and
in
operation ...
Executive Order No. 546, being an implementing
measure of P.D. No. I insofar as it amends the
Public Service Law (CA No. 146, as amended) is
applicable to the petitioner who must be bound
by its provisions. The mere fact that the
petitioner possesses a franchise to put up and
operate a radio communications system in
certain areas is not an insuperable obstacle to the
public respondent's issuing the proper certificate
to an applicant desiring to extend the same
services to those areas. The Constitution
mandates that a franchise cannot be exclusive in
nature nor can a franchise be granted except that
it must be subject to amendment, alteration, or
even repeal by the legislature when the common
good so requires. (Art. XII, sec. 11 of the 1986
Constitution).